The Talk Show Continues!

We have received a comment since our last show, regarding our last show! Let's answer Anonymous' question, shall we?

Hey, I was just wondering how this method would work, When you are that far in debt (150,000) the bank usually does not allow you to take out a loan, let alone a second mortgage, Please answer my question!

Good question, anonymous! However, banks will allow you to take out a second mortgage. I do realize that they would question that you already have a mortgage along with your debt. In this case, you can show them your scenario being this:
Your house is worth 500,000 dollars, but your mortgage is still 200,000 dollars. Therefore, after selling your house and repaying your mortgage and your bad debt*, you still have 150,000 dollars in equity. So let's say you want to buy a house costing 400,000 dollars. If you get the mortgage and manage to pay off 50,000 dollars of it with rent before the tenants leave and none want to rent, you have two choices. Sell your first house, get rid of all your other debts and continue to pay your mortgage with your remaining 150,000, or sell your second house, (probably worth about 500,000 dollars by now) and pay off your second mortgage (350,000 dollars) along with your bad debt. That way you only have your mortgage to worry about!
That hopefully should answer your question, Anonymous. To sum it up, figure out a good scenario to present to the bank, along with proving you have equity, just in case.

*Bad debt is when you borrowed to buy something that deteriorates in value, like a car, or fancy dinners, anything like that. Good debt is when you borrow to buy something that will increase in value, such as your home.

1 comment:

Anonymous said...

I have a question I have been trying to get an answer to with no success. Does it make sense to pay down my mortgage by making extra payments if I plan to sell the house in 5 years or less? I hope you can help. Thanks.